Worried about my parent's retirement

Worried about my parent's retirement

They are currently in their late 40s and their savings look very bleak. They have their mortgage completely paid off and a bank account with $10,000. That is it. I have tried to convince them to invest in a mixer of bonds, stocks, and treasuries but they believe that it is gambling and they will lose their home and very little of what could be their retirement. They tell me that when they retire, they will cut back spending based on what they have. Now, I would never leave my parents. I will, of course, support them financially but this is absolutely frustrating. They believe that the government will take care of them. As of now, people are getting social securities and what not but that's not guaranteed forever or even when my parents retire. The money in the bank will not grow and I do feel like they are putting themselves at a disadvantage. I'm not sure what to do. I fear that their retirement will not be enough and I worry about being able to take care of them and myself, money-wise. Medical bills are outrageous when you are old and sick. They tell me not worry because they'll be fine but I am worried. What they have now does not reflect even a decent size saving for retirement. Anyways, sorry for the rant. I just don't know what to do!

Re: Worried about my parent's retirement

So they won't save for retirement. Do they have a pension plan? A 401k plan? Any IRA's?

If this was my situation, I would probably do the following...

1. Help them create a budget that allows them to put $5500 EACH into an IRA. Tell them it will reduce how much they have to pay the IRS right now. They might buy into that.

2. Help them create a budget taht allows them to save for emergency repairs. Like the hot water tank needs to be repalced. Or their car needs work.

3. I wouldn't say this to them, but keep it in the back of your mind that they may qualify for a reverse mortgage in their later years. I don't personally like the reverse mortgage, but it works for some people.

4. Discuss why they expect you to support them in their retirement. Maybe they don't realize that is what you HEAR when you KNOW they aren't saving for retirement. Maybe it will cause them to make some behavior changes.

5. Offer to help manage their savings. Go for safe investments like CD's. They won't get rich off of safe investments, but at least the money will be tied up and available down the road. Maybe put $100 a month into a CD?

I had no idea, until a few years ago, that my "folks" were clearing 25k a month. Yes, you read that correctly. Take home, $25,000.00 a month! And they still needed financial help from me. They are retired now. The only income they have is social security and a very small disability check. They are unable (I say by choice) to live within their means. They feel like they are super frugal and so dang broke. I don't enable them. I won't loan them money. And I expect that they will need to move in with me sooner rather than later. Their home is falling apart around them. (It might qualify for condemnation due to mold. Years ago, the shower wall fell down. They never fixed it - just taped several plastic bags over the hole.)

I can't change their behaviors. All I can do is move forward with my life and have a plan that will allow them to live with me. Believe me, their pride says that they can't live with me, but their bank account says something else....and the IRS just slapped a lien on their house and their car.

So make a plan to help yourself, your stress level, and your folks. They may, or may not, accept the help.

Re: Worried about my parent's retirement

Many factors to consider here -

- what kind of work do they do ? If they are office type jobs, they could work for another 20 years.

- where do they want to retire to and is it cheaper than current location ? People here on Long Island are selling their 500-800k houses and going down south and buying for 250/300k or so. And saving on things like property taxes.

If they want to save, they should be in equities, cash/CD's will be losing investments especially in real rates of return.

Late 40's is too young to hit panick button. A more global view with much more information is needed.

Main point though is that you can't sacrifice your finances and retirement to help them. You can be young and have no money but you can't be old and have no money. There are no loans in retirement.

Re: Worried about my parent's retirement

They have no pension plans, 401ks, nothing!

I have no idea how they will live during their retirement.

I was just talking to them the other day and my parents told me that CDs and such are too low to even earn anything on. I don't think my parents want their money tied down and they want to use it whenever they want. Aka why they have so little in their bank! It's because they spend whatever money they have. Frankly, I might sign them up for annuities. They have no interest in saving in extremely safe investments because it earns too little but they won't invest in bonds and stocks because they can't afford to lose that money. My parents are planning a trip this summer and plan to spend 10k! It's outrageous because I told them that 10k can be invested. They believe that 10k won't grow much even when I showed them how much it CAN grow 17 years from now. Nope. They won't have it and they think it's better to spend it on a 10k vacation. The believe that millionaires are the only people who should invest. *rolling my eyes* how else did these people make a million dollar? THEY STARTED INVESTING YOUNG WITH VERY LITTLE MONEY. Geez. I'm so upset!

Re: Worried about my parent's retirement

Hannahj55 wrote:

They are currently in their late 40s and their savings look very bleak. They have their mortgage completely paid off and a bank account with $10,000. That is it. I have tried to convince them to invest in a mixer of bonds, stocks, and treasuries but they believe that it is gambling and they will lose their home and very little of what could be their retirement. They tell me that when they retire, they will cut back spending based on what they have. Now, I would never leave my parents. I will, of course, support them financially but this is absolutely frustrating. They believe that the government will take care of them. As of now, people are getting social securities and what not but that's not guaranteed forever or even when my parents retire. The money in the bank will not grow and I do feel like they are putting themselves at a disadvantage. I'm not sure what to do. I fear that their retirement will not be enough and I worry about being able to take care of them and myself, money-wise. Medical bills are outrageous when you are old and sick. They tell me not worry because they'll be fine but I am worried. What they have now does not reflect even a decent size saving for retirement. Anyways, sorry for the rant. I just don't know what to do!

Re: Worried about my parent's retirement

I'm happy they paid off their mortgage but when I asked them if they would like to refinance and use their equity as a line of credit for dire emergencies, they flat out said no. I have tried to help my parents with their credit scores because they don't have too much credit AND they are the cash only type people. Both my parents think credit cards are evil and bonds and stocks are bad. Quite frankly, I understand why they would think so but once you learn how to use them, they are absolutely valuable and useful. If you don't know how to use them properly, you'll be in sh*t hole for a long time. Anyways, I will continue to convince them until they do something. I wouldn't give up on them. As for annuities, I was almost positive they can make payments or a lump sum. I could be wrong in this department.

Re: Worried about my parent's retirement

From what I'm reading, you're a concerned child for your parents' financial well being. That is certainly admirable. And you've tried a variety of things to get them to look to the future. Yet, they don't...or won't. They are in denial. They have made their choices in life and even though you are trying to guide them, they have to WANT to be guided. It's like alcoholism or drug addiction (I AM NOT SAYING THEY ARE EITHER!) -- they have to WANT help in order to GET help. See the correlation? If they don't want your help, nothing you say or do will change their minds...until they see the big picture and WANT guidance.

One missing component - location and value of their home. This could be a critical factor. They may be relying on the value of their home and it's location as their nest egg for the future. It's paid off. If it's in a market where real estate is booming, they may think that, at some point in the future, they can sell and downsize and all will be OK. Yes, it's counting on something that may not be ideal, depending on location and value. And if home prices are declining in their market, that can be troublesome. But owning it free and clear is certainly a benefit, regardless of the market. It still has a value above zero, which is what they owe. You say they are in their 40s...in 30-40 years the value of that house may skyrocket and provide them with with they need for their retirement. Talk to them about this aspect of their financial future. Prehaps this is what they are counting on.

In a booming market they may be set for life. If not in such a market, they may be in for some financial distress. But it looks to me you've done your due diligence with your parents, and they've chosen to not heed your advice. Whatever happens, you've done what you can, and as I said above, that's admirable.

Re: Worried about my parent's retirement

Hannahj55 wrote:

... They tell me that when they retire, they will cut back spending based on what they have. ... They believe that the government will take care of them. ...

That is the problem.

Too many people think of Social Security as a 'retirement' plan, when the reality is that it is merely insurance, and not very good insurance at that -- not even capable of keeping people from being below the poverty line in many cases (average annual benefits for someone who starts collecting at 70 are ~$17.8k). Perhaps you could approach the subject from the perspective of "If you don't plan and save for your retirement, no one will -- you cannot count on the govt not to waste your tax dollars, nor to take care of you". Changing their mind on that point will be critical to making any headway toward retirement planning.

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IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.